Paper explores development of Central Bank function over its history and its more interventionist role since the financial crisis

AN independent Scotland could establish a Central Bank with a stakeholder model of governance involving people from trade unions, industry, civic society and more.

The proposal is one of a number of ideas in a new paper for the White Paper Project, Common Weal’s development of a new case for Scottish independence, on a Scottish Central Bank.

‘Scotland’s National Bank: Central Banking in an independent Scotland’ is authored by Dr Craig Dalzell, Common Weal head of research, and can be read in full here.

The paper explores the 350 year history of Central Banks, and argues that its modern day function is substantially different from when it began. In the post-crash era Central Banks have become a lot more interventionist including through QE programmes, and the paper explores debates around whether they should continue to be independent or not from government.

“Perhaps instead of filling the governing boards of the Bank just with bankers and academic economists, Scotland could adopt a “stakeholder” model by forming a board – either advisory or with actual power – made up of people from trade unions, industrial and agricultural groups, social bodies and other people who can represent the demos of our nation.” Dr Dalzell

Other key points include:

– Central Bank roles and responsibilities typically include currency issue, financial monitoring and regulation, price stability, trade stability, and financial clearing between commercial banks, but the prioritisation and weight given to particular areas is highly divergent between different Central Banks. There is no one approach.

– The cost to administer a central bank scales strongly with the size of the host country. A central bank in a country the size of Scotland could expect running costs of around £140- £200 million per year. However, central banks are usually profit-making enterprises once operational.

– A Scottish central bank could expect to employ between 350 and 1,000 people depending on roles and responsibilities.

Commenting on the proposal for a stakeholder governance model in the paper, Dr Dalzell stated in The National that: “There are many [Central Bank] models in use around the world – we should not assume that the Bank of England is the only possible way of doing things – and many of them work quite successfully. Perhaps instead of filling the governing boards of the Bank just with bankers and academic economists (who may still be needed for their expertise with the technical details of implementation), Scotland could adopt a “stakeholder” model by forming a board – either advisory or with actual power – made up of people from trade unions, industrial and agricultural groups, social bodies and other people who can represent the demos of our nation.”